Japan eyes fresh US$1.1 trillion stimulus to combat coronavirus pain

TOKYO - Japan will compile a new US$1.1 trillion stimulus package that includes significant direct spending, to stop the coronavirus pandemic pushing the world's third-largest economy deeper into recession, a budget draft seen by Reuters showed on Wednesday .

The combined spending would also be among the largest fiscal packages to deal with the coronavirus in the world, approaching the size of United States' US$2.3 trillion aid programme. To fund the costs, Japan will issue an additional 31.9 trillion yen in government bonds under the second supplementary budget for the current fiscal year ending in March 2021, according to the draft.

"The BOJ's yield curve control should prevent a spike in long-term interest rates," Chotaro Morita, chief bond strategist at SMBC Nikko Security, said."Volatility in the JGB market will depend on the BOJ's ability to control its bond purchases." The new package will include steps such as an increased medical spending, aid to firms struggling to pay rent, support for students who lost part-time jobs, and more subsidies to companies hit by slumping sales.

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